Why it matters
- Monday's oil drop was concentrated in the next few months of the futures curve. January 2027 Brent fell 7.63% to $104.77, while December 2027 Brent fell 3.55% and December 2028 Brent 1.85%, Yahoo Finance settlement data show.
- That shrank the curve's backwardation. January 2027 Brent's premium over December 2027 narrowed to $19.79 a barrel from $25.32 on Friday, Oct. 30. Its premium over December 2028 narrowed to $27.27 from $34.47.
- Bond-market inflation expectations followed. The 5-year breakeven fell 0.07 point to 2.39% and the 10-year to 2.29%, its lowest since Aug. 17, by Global Terminal's calculation from Treasury yields.
Analysis: this piece includes our interpretation of the facts reported.
Oil's 7.6% plunge on Monday, Nov. 2, mostly repriced the next few months of the futures curve, not the years after. January 2027 Brent crude settled at $104.77 a barrel, down $8.66, while December 2028 Brent fell just $1.46 to $77.50, Yahoo Finance data show. The drop also pulled the 5-year Treasury breakeven inflation rate down 0.07 point to 2.39%, Global Terminal calculates from Treasury data.
Brent kept falling on Tuesday. January Brent traded near $100.94 at about 13:45 GMT, down 3.7% from Monday's settlement and 11.0% below its Oct. 30 close of $113.43, the contract's high, Yahoo Finance data show. CNBC reported Monday's settlements of $104.77 for Brent and $96.46 for December West Texas Intermediate. It said oil fell as the U.S. and Iranian presidents signaled openness to diplomacy. This analysis looks at what the move did to the futures curve and to inflation pricing.
How did the Brent futures curve change?
The front fell hardest, comparing Friday, Oct. 30 and Monday, Nov. 2 settlements.
| Brent contract | Oct. 30 | Nov. 2 | Change | Change, % |
|---|---|---|---|---|
| January 2027 | $113.43 | $104.77 | -$8.66 | -7.63% |
| February 2027 | $109.56 | $101.70 | -$7.86 | -7.17% |
| March 2027 | $106.19 | $99.04 | -$7.15 | -6.73% |
| June 2027 | $98.22 | $93.06 | -$5.16 | -5.25% |
| September 2027 | $92.29 | $88.40 | -$3.89 | -4.21% |
| December 2027 | $88.11 | $84.98 | -$3.13 | -3.55% |
| December 2028 | $78.96 | $77.50 | -$1.46 | -1.85% |
Source: Yahoo Finance daily data for Brent futures (BZF27.NYM through BZZ28.NYM). Changes are Global Terminal calculations.
The curve is still steeply backwardated, meaning near-term barrels cost more than later ones. But the gap shrank. January 2027 Brent's premium over December 2027 fell to $19.79 from $25.32, and its premium over December 2028 fell to $27.27 from $34.47.
Barrels for the next few months lost most of their premium; late 2027 and 2028 barely moved. Even after Monday, January 2027 Brent was up about 74% this year: it traded at $60.36 on Jan. 2, Yahoo data show.
What does the oil drop mean for inflation expectations?
Bond prices now imply less inflation. The 5-year breakeven, the gap between the 5-year Treasury yield and the 5-year TIPS yield, fell to 2.39% on Monday from 2.46% on Friday, Global Terminal calculates from Treasury's daily par yields. It peaked at 2.49% on Oct. 28.
| Maturity | Breakeven, Oct. 23 | Breakeven, Oct. 30 | Breakeven, Nov. 2 |
|---|---|---|---|
| 5-year | 2.48% | 2.46% | 2.39% |
| 10-year | 2.34% | 2.34% | 2.29% |
| 30-year | 2.25% | 2.23% | 2.22% |
Source: U.S. Treasury daily par yield curve and real yield curve rates. Breakevens are nominal minus real par yields, Global Terminal calculations.
The move came from real yields, not a bond rally. The 5-year Treasury yield slipped only 0.01 point to 4.70%, while the 5-year real yield rose 0.06 point to 2.31%, Treasury data show. The 10-year breakeven, at 2.29%, was its lowest since Monday, Aug. 17.
Oil has led short-dated inflation pricing all year. Across 208 daily moves from Jan. 2 to Nov. 2, the correlation between January 2027 Brent's daily percentage change and the daily change in the 5-year breakeven was 0.67, by Global Terminal's calculation from Yahoo and Treasury data. For the 10-year breakeven it was 0.56. That is a link, not proof of cause.
Monday's 0.07-point drop tied for the third-largest daily fall in the 5-year breakeven this year. The two bigger ones also came on big oil down days, Monday, March 23 (down 0.10 point as January 2027 Brent fell 6.0%) and Wednesday, May 6 (down 0.09 point as it fell 5.8%). Monday's 7.63% fall was the contract's biggest one-day drop in the two years of daily data Yahoo shows.
How does this compare with actual inflation?
Market pricing sits well below current inflation. U.S. consumer prices rose 3.7% in the 12 months to September, the energy index rose 20.4% and gasoline 34.2%, the Bureau of Labor Statistics said on Oct. 14. October's report is due Tuesday, Nov. 10. The Fed held its target range at 3.75% to 4% on Oct. 28, in a 10–2 vote, its statement said; Lisa D. Cook and Beth M. Hammack preferred a quarter-point hike.
Track Brent, WTI and Treasury yields on our world markets page. For background, see our look at real yields and breakevens before the Fed and October's markets by the numbers.
Sources
- Yahoo Finance, chart data for Brent futures January 2027 (BZF27.NYM), February 2027 (BZG27.NYM), March 2027 (BZH27.NYM), June 2027 (BZM27.NYM), September 2027 (BZU27.NYM), December 2027 (BZZ27.NYM) and December 2028 (BZZ28.NYM)
- CNBC, Crude oil prices sell off more than 7% on Iran peace talk hopes ahead of U.S. midterms (Nov. 2, 2026)
- U.S. Treasury Department, Daily Treasury real yield curve rates, 2026
- U.S. Treasury Department, Daily Treasury par yield curve rates, 2026
- Bureau of Labor Statistics, Consumer Price Index, September 2026 (Oct. 14, 2026)
- Federal Reserve, FOMC statement (Oct. 28, 2026)